Bank gross NPA at 7-year low at 5%, internet NPA at 10 12 months low: What the RBI Financial Stability Report says

On December 29, Friday, the Reserve Bank of India (RBI) launched its Financial Stability Report (FSR). In September 2022, the gross non-performing asset (GNPA) ratio of scheduled industrial banks (SCBs) fell to a seven-year low of 5%.

According to the FSR report, internet non-performing belongings (NNPA) fell to a 10-year low of 1.3 p.c in September 2022.

“The gross non-performing asset (GNPA) ratio of scheduled commercial banks (SCBs) fell to a seven-year low of 5.0 per cent and net non-performing assets (NNPA) have dropped to ten-year low of 1.3 per cent in September 2022.”@RBI in its twenty sixth Financial Stability Report (FSR). pic.twitter.com/d7c3eCdfEu

— NSitharamanOffice (@nsitharamanoffc) December 29, 2022

In phrases of sectoral asset high quality, the RBI’s Financial Stability Report famous that banks’ gross non-performing belongings improved in many of the sectors. The GNPA ratio continued to enhance within the industrial sector, but it surely remained elevated within the gems and jewelry and development sub-sectors. However, asset high quality within the private loans phase improved in H1FY23, notably for housing and car loans.

In the twenty sixth subject of FSR, RBI famous that the worldwide economic system is confronted with formidable headwinds with recessionary dangers looming giant. The mixture of a number of shocks has clamped monetary situations and raised volatility in monetary markets.

RBI’s FSR highlighted that the enhancements in asset high quality, a return to profitability, and powerful capital and liquidity buffers of scheduled industrial banks (SCBs) are contributing to the buoyant demand for financial institution credit score and early indications of a revival within the funding cycle.

In the foreword of the FSR, Shaktikanta Das, RBI Governor highlighted that “the results of the stress tests presented in this issue of the FSR imply that banks would be capable of coping with even severe stress conditions if they materialized. Furthermore, in spite of formidable global headwinds, India’s external accounts remain well-cushioned and viable.”

Macro stress checks for credit score danger present that SCBs can meet the minimal capital necessities even beneath extreme stress conditions. Under the baseline, medium, and extreme stress situations, the system-level capital to risk-weighted belongings ratio (CRAR) in September 2023 is projected to be 14.9%, 14.0%, and 13.1%, respectively, the FSR said.

The stress checks for open-ended debt mutual funds revealed no breaches in rate of interest, credit score, or liquidity danger limits. The consolidated solvency ratio of each life and non-life insurance coverage corporations remained above the stipulated minimal degree.